Chipmaker Broadcom has confirmed its takeover of software giant VMware, confirming earlier reports of an imminent deal. The $61 billion cash and stock deal “advances Broadcom’s strategy to build the world’s leading infrastructure technology company, with track record of acquiring established, mission-critical platforms”, the company said. “This transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software as we reimagine what we can deliver to customers as a leading infrastructure technology company,” said Broadcom President and CEO Hock Tan.
“We look forward to VMware’s talented team joining Broadcom, further cultivating a shared culture of innovation and driving even greater value for our combined stakeholders, including both sets of shareholders.”
“VMware has been reshaping the IT landscape for the past 24 years, helping our customers become digital businesses,” added Raghu Raghuram, Chief Executive Officer of VMware.
“We stand for innovation and unwavering support of our customers and their most important business operations and now we are extending our commitment to exceptional service and innovation by becoming the new software platform for Broadcom. Combining our assets and talented team with Broadcom’s existing enterprise software portfolio, all housed under the VMware brand, creates a remarkable enterprise software player. Collectively, we will deliver even more choice, value and innovation to customers, enabling them to thrive in this increasingly complex multi-cloud era.”
The deal, which Broadcom hopes to complete before the end of 2022 to fold into its 2023 financial year, will see the company take on an additional $8 billion of VMware debt.
There is no news about job losses or consolidation, but Broadcom’s Software Group will rebrand and operate as VMware.
VMware was spun off by Dell in a $64 billion deal in November 2021, creating an independent company focused on virtualization and cloud tools.
Broadcom predominantly focuses on hardware, making components for the iPhone, industrial equipment, and much more. It is, in this sense, an old-school conglomerate.
But the company has been increasingly focused on data centres and acquiring VMware offers the company a chance at making both the hardware and software for the cloud’s infrastructure.
From this perspective, buying VMware makes a lot of sense: it is a software business, meaning that margins and profits remain largely unaffected by macro trends in supply chains.
Broadcom’s recent $20 billion bid for SAS, which sells business intel and data management software, fell through at the final hurdle, potentially acting as the catalyst for its VMware deal.